A recent decision has made a huge change in the interpretation of the law in Phillips & Ors V Francis
Since 1985, service charge expenditure has been subject to control
1 Fair and Reasonable in all respects in what is being done, how, when and it's procurement and delivery.
2 Expenditure over a certain amount- 1 applies generally but there are caps on the amount recoverable.
Since 1985 the trigger for 2 was where a landlord looked to expend an amount per flat(£50) or per block (£1000), whereupon he was required to consult.
Litigation and determination created context that abuse of this process, dividing up work to avoid consultation, could be recognised as such.
Amendments in CLRA 2002 changed 2 in that
a: long terms agreements of more than £100 and any one leaseholder contributing more than £100 in the year,
b:for qualifying works of repair maintenance and improvement, £250.
Now the industry had adapted the earlier context treating expenses of more than £250 for any one leaseholder as being a trigger in the same way as £50 per unit or £1000.
The decision has challenged the notion of a trigger re defining £250 as any and all expenses related to qualifying works in the period eg the financial year for the service charge account.
That means that following the logic of the decision, every item of expenditure of Qualifying Works would be added up, not simply items or a project where one leaseholder would contribute £250 or more.. The practical implications are therefore staggering- at what point do you consult? Do you require a section 20 for light bulb?
Pending a review, a change in the regulations, or appeal, the exact implications will have to be considered in future decisions.
Two main points:
ARMA have released a briefing note on this http://www.arma.org.uk/doc/public/Ph...blic-brief.pdf
LEASE advice on Section 20- while this takes you through the mechanics it cannot now be taken as indicative as to when to consult or not.
Personally I consider it a flawed and ludicrous decision, a moments reflection over the conclusion should have shown the Chancellor that his thinking was flawed. I have written to him but I am not expecting a reply